Luxury Coach & Transportation

November 2018

Magazine for the professional limousine, charter and tour industry.

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MOTORCOACHES: FINANCE A Walk Through Coach Profits These simple return-on-investment formulas will help you truly see if your buses of all sizes are making enough money. By Tom Holden, LCT contributing writer I n the July issue, I wrote about "e True Cost of Running a Bus" (p. 40-41), where you need to understand the dif- ferences between fixed and variable costs. (e article is available on www.lctmag.com or you can access it using this link https://bit.ly/2y0192i). As a follow-up, I'd like to share two formulas for calculating your ROI on each motorcoach and minibus so you as an operator are always aware of your rolling bottom line. An ROI (return-on-investment) on a moving vehicle is easy to understand, but difficult to keep consistent. ere are so many situations that can occur. If you are an investor in real estate, your ROI remains stable most of the time. Vacancies are mostly the biggest change in real estate ROI, whereas with buses the variable is in maintenance costs. e newer the bus, the less maintenance cost you will have; the older your bus, the more you will need to spend on maintenance. Here are two examples on how to calculate ROI: 1) ROI = CF / IC (Cash flow divided by invested capital) 2) ROI = NI / CI (Net income divided by cost of investment) #1 ROI = CF / IC (Cash flow divided by invested capital) Fill in this form: Price of bus Invested Capitol <= Down Payment Income All payments/expenses/fixed costs Income – Expenses = Cash Flow Cash Flow x 12 = Annual Revenue Expense Don't you despise that word? Here is where the problem comes in. In my July article, I included a detailed list of fixed and variable costs. at's one reason why operators tend to be all over the board when thinking about profits, or ROI. I listed 59 examples of fixed costs and 12 examples of variable costs. BOTH of these line items are your "expense" total. So as you start to use this example, please return and read this article again. #2 ROI = NI / CI (Net income divided by cost of investment) Grab your financials from the CPA, go to your year to date, and take your net incomes and divide it by your cost of investment. e following are two real numbers. In the motorcoach industry, Spader Business Management, a leading financial 28 WWW.LCTMAG.COM LUXURY COACH & TRANSPORTATION NOVEMBER 2018 You may own the bus, but if you don't have a driver for that requested date, you are "S.O.L." and your ROI will decline.

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